2010 - Acrylic Latex Supply Chain Overview Building & Industrial Mat Committee Meeting May 2010
Agenda Review of Acrylics Supply Chain Petrochemicals to Specialty Polymers Acrylic Chain Infrastructure Trends and Drivers Current Acrylic Polymer supply constraints and outlook Questions 2
Acrylic Platform Major Raw Material Key Monomer (Building Blocks) Polymer Products End-Uses Propylene Acrylic Acid Polyacrylic Acid Disposable Diapers Detergents Water Treatment Fossil Fuels Refining: Crude Oil & Natural Gas Ethyl Acrylate Butyl Acrylate Acrylic Resins Acrylic Emulsions Plastics Additives Industrial Coatings Latex Paints Textiles Paper Adhesives PVC/Plastics Acetone Natural Gas Methyl Methacrylate Acrylic Sheet Molding Resins Petroleum Chemicals Signs and Displays Automotive Lighting Fixtures Building Panels Motor Oil Monomers Paint and Coatings, Adhesives, CIS, Plastics Additives 3
Acrylic Infrastructure Supply/Cost Elements Downstream Demand (End-use products using acrylic based products superabsorbents, coatings, construction products, etc) Acrylic Acid Feedstock Supply/Costs (Propylene) Acrylic Monomer Supply (BA, MMA, 2-EHA, etc)
CMAI Data Contract Benchmark Stream Value Delivered United States CMAI Data Contract Benchmark Stream Value Delivered United States
Propylene - Tight Supply Drivers Global recession - Capacity Reduction Permanent closure of several steam crackers and refineries in 2009 LyondellBasell, ChevronPhillips, Sunoco, Eastman, Dow Resulting in nearly 1.9 billion pound capacaity reduction mainly chemical grade propylene Proliferation of Shale Gas Technology Increased natural gas liquids to market refineries adjusting to favor these lighter feedstocks over heavier weight feedslates from naptha and gas oil Net result is decrease in propylene production Capacity Closures + Shift to lighter feedstocks has reduced Polymer & Chemical grade propylene production 30%
Global Supply Effect Past Present Multiple RM Suppliers Reliable Backup Supply Few RM Suppliers Poor Backup Supply 7
The Cost Out Effect Over Capacity Global Competition Chemical Industry: Last 20 Years 2010 Over Capacity Margin Erosion Cost Cutting Capacity People Assets Inventory Capacity Over Constraints Capacity Global Competition RM Volatility Over Capacity Supply RM Volatility Outages 8
Economic Rebound as Fierce as the Decline Worst recession since Great Depression has led to biggest rebound in Chemical Industry history Adjusted production plans unable to keep pace with demand in all regions Leaders are responsibly managing supply, safety, relationships to ensure clear, consistent delivery 9
Purchasing is rebounding much stronger than forecast Breadth of markets recovering is wide Suppliers are in new territory and coming up with new models to deliver on demand 10
Lean Infrastructure can t handle Problems with Operations 09 February 2010 HOUSTON (ICIS news)--lyondellbasell declared a force majeure (FM) on US olefins, market sources said on Tuesday, citing supply restrictions due to a delay in the restart of the company s Corpus Christi cracker in Texas. March 1, 2010: Shell Chemicals has declared force majeure on ethylene (C2) and propylene (C3) from its Moerdijk complex in The Netherlands and put all customers on allocation. Output of the site's cracker, with capacity for 900,000 t/y of C2 and 500,000 t/y of C3, had to be reduced following technical problems on 23 February. 04 March 2010 18:25 [Source: ICIS news] --Chevron Phillips Chemicals has declared force majeure (FM) on US olefins deliveries following an outage at one of its Sweeny crackers in Texas, market sources said on Thursday March 1, 2010 Lyon, France Despite all efforts developed to mitigate the effects of the Force Majeure declared on October 9th, 2009, Rhodia Polyamide is not yet in position to resume normal deliveries of its polyamide 6.6 products (ADN, HMDA, Nylon salt, Polymers, Engineering Plastics compounds and fibers). Mar 12, 2010... BASF has declared force majeure on acrylonitrile-butadiene-styrene (ABS in North America due to a shortage of butadiene feedstock April 7, 2010: Arkema Emulsion Systems will be implementing a sales control program on some acrylic latex products due to certain specific raw material supply constraints May 14, 2010 Chemical Week: Dow Chemical has declared force majeure on methyl methacrylate (MMA) in the U.S. due to production problems at its Deer Park, TX plant. May 14, 2010 Chemical Week: Lucite International placed contract MMA customers on allocation from its 155,000-m.t./year facility at Memphis, TN, further tightening the market,.
2010 Global Acrylates Production Disruptions Cut Across Companies and Regions Dow: Deer Park, TX MMA unit failure in April drives Force Majeure GAA separations unit failure in Feb. drives Force Majeure BASF: Freeport, TX Crude Acrylic Acid issues in Q1 Arkema: Bayport, TX Explosion closes site Arkema: Clear Lake, TX Customers report on allocation Sasol: Sasolburg, SA Production issues drive outage and customers report force majeure through May Lucite: Beaumont, TX MMA and GAA failure leads to 60% allocation in Q1 Arkema: Carling, France TOTAL strike severely constrains Propylene. Potential impact to acrylates plants Lucite: Singapore MMA disruptions in April BASF: Nanjing, China Propylene and Crude issues in January and Feb. Formosa: Kaohsiung, Taiwan Customers report limiting ester production to focus on GAA/SAP production 12
Acrylic Monomer/Polymer Outlook Propylene supply is improving; May propylene prices declined following steady increase since Oct 09 Monomer supply forecasted to remain tight through the 3 rd Quarter Dow crude acrylic acid unit running at 100%, but other producers still have capacity off-line for repairs MMA remains most critical NA monomer issue in short term Dow;s DeerPark, TX unit is back up and running 75% force majeure allocation to run through 2 nd week of June Plan is to return to 100% allocation 3 rd week of June, but is subject to change Monomer and Polymer Inventories will take time to re-build Global monomer supply remains very tight High season demand for coatings and construction materials Expect improving availability and return to more normal lead-times as we get through summer
Supply & Pricing Outlook Suggestions for managing your requirements Stay in close communication with your suppliers regarding your forecasted needs Provide additional lead-times when possible Pricing Outlook Raw material costs remain very hard to predict Raw materials remain at peak levels but forecasted to soften, but potential volatility remains Forecast accuracies over past 18 months have been poor Supply forecast to remain snug Stronger demand through busy season Tight polymer supply through busy season Overall acrylic polymer prices expected to remain near current levels as long as supply/demand balance remains tight and raw materials costs remain steady.
QUESTIONS
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